"Hong Kong City" themed marketplaces that sell only local products could be revived on the mainland if the relevant Hong Kong authorities get involved, a report says.

The report, released in December, recommends that the government work with mainland authorities to establish more "Hong Kong City" markets to promote the city's brand.

The report - "Road for Hong Kong into the mainland market" - was penned by scholars from Sun Yat-sen University in Guangzhou and local political party the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB). They argue that although Hong Kong products enjoy a high degree of popularity among mainlanders, it is nevertheless inconvenient for most consumers to come to the city for shopping on a regular basis. However, well organized "Hong Kong City" marketplaces will not only bring economic benefits but also help promote the city's brands in the mainland market.

The research group commissioned by the university and the DAB carried out a survey in Beijing, Shanghai, Guangzhou, Xi'an, Wuhan and Chengdu recently, which showed that 68 percent of the respondents said they had bought Hong Kong-made goods in the past year while 54 percent said they did so within the past six months.

Most respondents said they like Hong Kong products due to their high quality, fashionable design, and - more importantly - the safety of the products.

But among the more than 1,000 local brands which touch on the service, manufacturing, and traditional industries, only seven major local brands including jewelry maker Chow Tai Fook and retailing chains Watson are known to more than half of those surveyed.

However, as most of the city's thousands of local firms are boutique companies with limited brand influence, Wong Ting-kwong, a member of Hong Kong's Legislative Council (LegCo), believes that themed marketplaces could help them strengthen their influence in the mainland market since consumers trust the "made in Hong Kong" mark.

Wong, who represents the import and export industry in a functional constituency seat in the LegCo, warned that one of the downfalls of "Hong Kong City" in its previous incarnation was that it sold inferior products. "It was disappointing and hurt the equity of the city's brands," he said.

The first "Hong Kong City" was opened in Guangzhou in 2004 under the Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA). It allowed products of Hong Kong origin to enter the mainland tariff free.

However, despite a promising start, sales began to nosedive after many shoddy goods were discovered in the market. It eventually ceased operations in 2006 when some local businessmen decided to cut their losses and run, in many cases not getting their rent deposits back.

Wong said he believed a lack of adequate supervision killed what could have been a good business model. However, joint cooperation between governments on both sides would ensure the healthy and orderly development of "Hong Kong City", he added.

"Since the Hong Kong government is dedicated to promoting the city's brands on the mainland, they should help promote it," Wong said. "The building up of a Hong Kong-themed marketplace involves huge investment which individual investors may not be able to afford."

Meanwhile, Ann Chiang, DAB vice chairman of commerce and industry, says that permanently established "Hong Kong City" marketplaces will build publicity for the city as well as meet the growing demand of mainland consumers for Hong Kong products.

"Though Hong Kong-made goods mainly target the middle class and higher income earners on the mainland, the increase in the number of wealthy individuals with enhanced buying power has helped offset the disadvantage of Hong Kong's small retail market," Chiang said.

Chen Guanghan, director of economics at the Center for Studies of Hong Kong, Macao, and the Pearl River Delta, Sun Yat-sen University, agrees that Hong Kong brands are naturally popular among mainlanders because they are both Chinese and Western in terms of style and characteristics. They are also usually reasonably priced compared with luxury brands.

Chen said that maintaining high product quality is imperative if Hong Kong-made goods are to remain popular on the mainland. Thus figuring out effective approaches when counterfeit goods still run rampant in many parts of the mainland, should be a key priority, he added.

The research report recommends that one step forward would be for mainland authorities to tighten the requirements for goods sold in "Hong Kong City" and strengthen supervision of marketplace operations. They should also frequently conduct random quality checks on goods sold there and impose heavy fines on any offenders.

The report adds that Hong Kong authorities should also assume responsibility for quality certification of Hong Kong-made products.

"Maybe the Hong Kong Trade Development Council (HKTDC) is in the position to do the authentication job," said Wong, adding that with enough regulatory assurance and supervision, mainland customers would not have to worry about the quality of goods.

However, Pansy Yau, deputy chief economist at the HKTDC, said that although the "Hong Kong City" idea is interesting, it is easier said than done.

"This is not the typical approach the Hong Kong government would adopt to help promote local brands," she said. "And moreover, government involvement is not the only factor that would ensure its smooth operation."

"A lot of unexpected issues could pop up from this concept that would be unable to be solved by us - such as disputes over intellectual property. I am not really a fan of this idea and I don't think it will be achieved in the near term," she added.

The HKTDC organizes trade fairs every year matching local companies with business opportunities on the mainland.

China Daily

(HK Edition 01/07/2011 page3)